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Part 5: A Short History of COM DEV International

Posted March 6, 2016 by Chuck Black
Epilogue


By Robert Godwin 

The COM DEV website on February 8th, 2016.

As outlined most recently in the January 24th,2016 post, “Did the Government Let COM DEV Go Because They Have Bigger Fish to Fry?” iconic Canadian space company COM DEV International has been purchased by US based Honeywell International

And that’s not the only recent sale of an iconic and militarily significant Canadian company to the US. 

There were once limits to the types of sales we would allow. 

For example, we don’t allow foreign ownership of our chartered banks and in exchange for that quasi-monopoly our banks have acceded to some relatively stringent regulations which were certainly useful for cushioning our economy from the worst vicissitudes of the global meltdown of 2008. And, in 2009, we refused to allow BC based MacDonald Dettwiler (MDA) to be purchased by US based Alliant Techsystems (ATK).

In this new age of mega-data, information and incessant global security fears, it would simply seem prudent to establish safeguards to protect our high tech industry…

Michael Valentine O’Donovan died in 2005 having earned the order of Canada. He became a valuable member of the Galt/Cambridge community as well as a generous philanthropist.

His $5000 bet on Hansen and Springer’s little start-up provided him with the life he had dreamed of since he was a child reading Arthur C. Clarke novels. His technology is aboard more satellites in the “Clarke” or geostationary orbit than almost any other technology made by any other company.

It’s worth noting that COM DEV’s largest contract ($160Mln CDN spread out over a decade) is also a government contract for Canada’s contribution to the James Web Space Telescope (JWST). Hopefully the Federal government will find some new Canadian company to fund the next time they wish to contribute to an international partnership. Screenshot c/o CSA.

Would he have approved of his company being purchased by American interests? We’ll never know. But what we do know is that he wasn’t averse to buying and selling American companies when it suited his purposes.

But you might ask, is it a matter of scale? America has something like 30 times as many defense contractors as Canada so they can afford to lose them more readily. But this argument makes no account of the human factor; such as the many benefits and good jobs brought to the community of Cambridge by the presence of such an accomplished company. We can only hope that Honeywell recognizes that a solid, smart and technologically savvy work-force is worth more than a string of patents.

The evidence would seem to suggest that COM DEV was built on the back of no small amount of government largesse in its early years. Many millions of tax payer dollars, both directly and indirectly, have slipped into the COM DEV coffers since O’Donovan cut his deal with RCA in 1974.

But this is a game played by almost every country. You’re either “in” or you’re “out.

Being “in” doesn’t just mean you get lots of grants and contracts, it also means you get to sit at the grown-ups table and learn the wiles and tricks of the trade. Governments don’t like to give money to start-ups, but if you are useful and reliable then they don’t like to miss out.

Being “out” means you aren’t taken seriously. If your own government doesn’t think you are worth supporting, what foreign government will?

COM DEV isn’t the only Canadian company which has been sold to Americans since the current Federal government took power in November, 2015. As outlined in the January 27th, 2016 Globe and Mail article, “Liberals criticized for not conducting security reviews on foreign takeovers,” the recent sale of the Allstream fiber-optic network to the US based Zayo Group also raised concerns over Liberal party policies in this area. As outlined in the article, in 2013, the Harper government blocked the sale of Allstream to an Egyptian telecom group on the grounds that it provided “critical telecommunications services to businesses and governments, including the government of Canada.” But that was then and this is now. Graphic c/o Globe and Mail.

Val O’Donovan was a dreamer. He was a history, Latin and English literature graduate who wanted to do something cool in outer space. So he forced himself to learn mathematics and engineering.

Canada proved to be a worthy host for his ambitions. He invented something clever and unique which could be applied to the technology invented by his hero Arthur C. Clarke. He likely would have enjoyed the irony of his company being purchased by the same company who designed all of the controls and systems for the spaceships seen in Clarke’s greatest work, the movie 2001: A Space Odyssey.

Robert Godwin.
At the end of the day COM DEV’s story carries many lessons that are relevant. It includes hard working immigrants, cutting edge dreams, government competence and incompetence, foreign investors, foreign purchases, political shenanigans and high achieving young people with dreams.

Like any true story there is always another chapter still to come.
_____________________________________________________________


Robert Godwin is the owner and founder of Apogee Space Books. He is also the former space curator at the Canadian Air & Space Museum and the curator of the The Space Library, an online repository of 30,000+ pages of space information and papers. 


Please consider subscribing to the library for only $5. Your contributions help to support new research and the maintenance of the existing repository.

Last Week: Into the 21st Century as part 4 of “A Short History of COM DEV International” continues!

To Start at the Beginning, check out John Hansen, Samuel Singer and Michael Valentine O’Donovan in part 1 of “A Short History of COM DEV International.

Full Story »

 
General

Part 4: A Short History of COM DEV International

Posted February 28, 2016 by Chuck Black
Into the 21st Century


By Robert Godwin 

The COM DEV website on February 8th, 2016.

As outlined most recently in the January 24th,2016 post, “Did the Government Let COM DEV Go Because They Have Bigger Fish to Fry?” iconic Canadian space company COM DEV International has been purchased by US based Honeywell International.

But while we were happy enough to acquiesce to the COM DEV sale, there are limits to the types of sales we allow. 

For example, we don’t allow foreign ownership of our chartered banks and in exchange for that quasi-monopoly our banks have acceded to some relatively stringent regulations which were certainly useful for cushioning our economy from the worst vicissitudes of the global meltdown of 2008.

And, in 2009, we also refused to allow BC based MacDonald Dettwiler (MDA) to be purchased by US based Alliant Techsystems (ATK).

In this new age of mega-data, information and incessant global security fears, it would simply seem prudent to establish safeguards to protect our high tech industry…

2000 was a slightly better year for COM DEV. Qualcomm invested $6Mln CDN as part of a licensing deal and shares went back to $12.65. In November the company announced anticipated growth from its M/ERGY high speed mobile product and turned a profit of $6.9Mln CDN for the year. A few weeks later the federal government under Prime Minister Jean Chrétien invested another $2.5Mln in the company to further develop the National Research Council (NRC) work done on surface acoustic wave technology.

COM DEV stock price and volume of trades on the Toronto Stock Exchange (TSX) covering the period from April 9th, 1999 until February 8th, 2016, when COM DEV was delisted from the TSX. As shown in the chart, COM DEV stock peaked on November 24th, 2000, dropped precipitously afterwards and never regained those heights. Graph c/o FactSet.

Three months later the company cut its wireless components business and posted losses yet again. This time shares dropped like a rock to $3. Consolidation was inevitable and just five days before the catastrophe of 9/11 they announced that they would be selling off their plants in England, China and New Brunswick.

Evidently the stock price had already fallen so low during the summer of 2001 that the events of 9/11 didn’t have any immediate impact. Things were already pretty desperate. They lost $16Mln on the year and sold off their RF Conditioning and satellite ground station component business to Montreal’s Mitec, essentially returning the company’s very first business back to its home town.

By the summer of 2002 COM DEV share value was so low O’Donovan seized the opportunity and started to buy back stock. He then sold the company’s broadband business, for an $11Mln CDN loss, to Axio Wireless of California. COM DEV shares plummeted to $1.53.

In the spring of 2003 the next big trough in the sky was the US Strategic Defense Initiative (SDI). This represented a massive cash-cow for any company who could acquire a piece of the action. The so-called “Star Wars” had been on contractors’ radar since President Ronald Reagan had first expressed his desire to put an impenetrable umbrella over the United States in the 1980s.

SDI, or the “Star Wars” program, as it was called, was generally expected to cost upwards of $1 trillion dollars when it was developed in the 1980’s. But the program was derailed by the Gramm-Rudman-Hollings Balanced Budget and Emergency Deficit Control Act of 1985 and the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987, both of which coincided with the growing public perception that a “peace dividend” or tax surplus would develop as defence programs were curtailed or cancelled in the aftermath of the fall of the Soviet Union. But after the events of September 11th, 2001, military spending again increased and all sorts of old ideas were back on the table. Graphic c/o The Space Handbook.

In the ensuing decades the idea had continued to stew in the corridors of Washington and it was once again back on the front burner as the repercussions to Western economies and security had been laid bare by the attacks of 9/11. Enormous pressure to join in on the program was brought to bear on Ottawa by the Bush Administration.

It became a contentious political issue in Parliament, but needless to say, companies like COM DEV were in dire need of a boost. The company publicly advocated for a role for Canada but the cards weren’t going to fall their way. By the summer of 2003 COM DEV shares were at just $1.25. The CIBC and National Banks both stepped in and bought $9.5Mln worth, so that COM DEV could pay off an old promissory note it had made in a complex investment south of the border in 1998.

Between 2004 and 2009 COM DEV shares bobbed up and down from as low as $2.60 and as high as $6. The surging Canadian dollar hurt exports, but the company had made some smart moves hedging currency and was able to weather this latest storm. The advent of HDTV helped, as did contracts with the Europeans worth close to $15Mln and in Asia worth $9Mln.

According to financial house Guru Focus, over the past 13 years, the median trailing annual dividend yield of COM DEV stock was 1.64%. The company share price at the time of writing ( in early February 2016, just before the firm was officially delisted from the Toronto Stock Exchange on February 9th) is $5.62, but the Canadian dollar is once again down to about 75 cents US, which made the purchase of COM DEV particularly attractive.

Robert Godwin.
The timing of the purchase has raised some questions about “getting it done” while Trudeau’s cabinet were still locating their offices. i.e. while no one was paying attention.

But based on historical fact it seems more likely that no one in Ottawa really cares.
_____________________________________________________________


Robert Godwin is the owner and founder of Apogee Space Books. He is also the former space curator at the Canadian Air & Space Museum and the curator of the The Space Library, an online repository of 30,000+ pages of space information and papers. 


Please consider subscribing to the library for only $5. Your contributions help to support new research and the maintenance of the existing repository.
Last WeekFrom Strength to Strength. At Least for Awhile as part 3 of “A Short History of COM DEV International” continues!

Next Week: Epilogue as “A Short History of COM DEV International” concludes!

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